As a financial advisor for over 35 years, when someone says, "reducing the scale of risk exposure is the right way forward" one needs to ask, for how long? Market (risk asset) corrections are a normal part of normal markets and it has been shown, time after time, that sticking with a long-term diversified investment allocation is more productive than trying to time the market with its transaction and tax costs. That's not to say one ignores risk but constructing a diversified risk-balanced investment allocation that would serve an investor for the long-term (10 or more years) would suggest to me that any market adjustment would not be detrimental to an investors financial health.

Volatility was and remained persistently low in the 1950s and 60s. This even includes some pretty spicy geopolitical periods (Cuban missile crisis anyone?)! I think it worthy to look at longer term perspectives rather than shorter term comparisons such as those this article makes.

The recipe for much higher VIX levels is...much lower VIX levels in the first place.

January 2016, the Japanese 30 year Bond hit 0,142 % yield.
Who would have thought in 1988 ?

Since the yield of the long end is at the root of any orthodox valuation method, controlling price discovery in the long end equals controlling equity valuations and controlling (suppressing) volatility.

If nowadays central banks allowed price discovery in interest rates, yields of all global bonds would be strikingly higher than where they are today, many countries and corporations would be insolvent. Too massive a short if it happened that way !

Bond yields keep collapsing since 1982. The MOVE (Bond Volatility Index) printed all time lows in July 2017.
Equity returns are getting lower by the day since 2009. The VIX also printed an all time low in July 2017, yesterday indeed !

Equities are expected to yield less than 1% over the next 12 years. I believe private investors could soon knock at the commodities pits in search for more exciting risk/return equations.

THAT is the real central banker's nightmare. You buy a 30 year bond yielding 0,142 %. Over the next 30 year period, it can go up 50%, down 50%, but also lose its entire value. Supply can be endless. If the debtor defaults, the bond bearer is gifted with a small piece of wall paper.

The day investors will be forced to compare 0% yielding paper assets (with unlimited potential downside) to 0% yielding commodities (with unlimited potential upside and limited potential downside), central bankers will realize how immature and arrogant it was to believe that killing paper yield (aka currency yield) would go unnoticed for investors.

The end game is to default. Unable to default by inflation, default will happen through currency destruction. You read it here.

Don't tell.... seriously.... I though that low/negative interest rates and yields getting flatter was a a tell that people though the right way forward was taking more risk....

Actually a case can be made that markets are not only under pricing high volatile assets, but this type of assets are so much better suited to hedge expected volatility, so maybe time to start buying them

Where to start? First by saying that Mr. Frida does no know what is happening and is shooting in all directions...

What we have been witnessing since 2008 is the decrease in money velocity and increase liquidity preference, which has determined the expansionary monetary policies. So until money velocity increases, central banks will continue to accommodate or we will face a liquidity crisis.

Now, for a bit of history. 2000-2008 was not an a period of extraordinary monetary expansion.If I can recall Money supply increased roughly at the same rate has the product, so in that time Central Banks were accommodating the increase in product.

This ABC re-birth is something usual, although its has been proved false always, there are some Austrian crawling out of his rock and preaching ABC and the end of the world.

If MR. Frida would take some time to think this through, he would notice that we are in a period of high demand for liquidity, which explain the most part of the stock valuation nowadays.

It would be a paradox to have a stock bubble and flat yelds... Why would people speculate on low risk assets, you speculate with high variance assets, not low variance ones...

Agents are just increasing the liquidity so they can face uncertainty, that has increased with Trumps election

'Why, then, don’t investors take advantage of extremely low volatility to buy cheap insurance?' The answer is that effective insurance may be free whereas cheap insurance may be a paper umbrella. Volatility is not some Deus ex Machina which can be invoked at need. It is endogenous if Liquidity is exogenous and vice versa.

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